Successful businesses ‘never let a crisis go to waste’. Indeed since an otherwise strong Q1’20 was interrupted by COVID-19, Mpac has further streamlined operations, accelerated R&D and launched new remote equipment diagnostic/acceptance testing, virtual reality & other ‘Industry 4.0’ services.
Sure these initiatives haven’t yet had time to fully feed through into the numbers, especially given access to some client sites has been restricted during the lockdowns. However “no orders have been cancelled” due to the pandemic, new contracts are being signed, the backlog stands at a healthy £45.4m (vs £39.9m LY & £52.2m Dec’19), H1’20 aftermarket sales were up YoY (£7.6m LY) and net cash closed June at £22.1m (or 110p/share, post £0.9m preference shares vs £18.0m Dec’19) thanks to tight working capital management (re debtor days at pre CV19 levels). The latter providing both ample liquidity to weather the most extreme of scenarios, and optionality (re M&A) if rivals ever become available at attractive prices.
Don’t get me wrong, conditions haven’t yet returned to pre-crisis levels and a handful of shipments were delayed in the first half. Hence our finger-in-the-air ‘guesstimate’, is that overall H1’20 revenues declined between 20%-25% (H1’19 £45.8m, previous record), delivering adjusted EBIT margins of 5% (vs 10% LY).
Going forward we believe H2 will be stronger than H1, underpinned by a robust orderbook and “resilience” within the US & Healthcare sector (see below) - provided of course the global economy continues to reopen. Elsewhere, Europe, Asia & the UK are on an upwards trajectory too, with Food & Beverage not far behind.